By: Sanjeev Keswani

The University of Findlay

Ohio, USA

Small Business Exports from India: A look into the leather Footwear Industry

In the sixties, India was know for its Leather Raw Material export

Today it is the major player in the finished goods sector of the market.

In the Leather Industry, leather footwear takes a bigger share of global trade & is also the backbone of the Leather Industry

It is ranked highly alongside the other top six foreign exchange earners of the country

India exports 55% of their total leather footwear to Europe, U.K , USA, Australia & Africa& ranks 2nd after China

Brief Introduction of the Industry

The Indian footwear factories have also achieved certification for ISO 9000, ISO 14000 & SA 8000(International Human Rights), (LeatherIndia.org, 2010).

Currently the average growth rate estimate is 12%. The skilled and unskilled workers consist of nearly 50 % of the

total workforce. Direct and Indirect employment figures are approximately 2.5

million, with 30% of that figure being women. It has especially given employment to women in the Southern

part of India. (Global Economic Summit, 2011).

footwear & footwear

components

tanning & finishing

leather garments

leather goods

including saddler &

harness, etc

The main cities and states :

In India, the cities of Ambur,

Ranipet, Vaniyambadi,

Trichi, and Dindigul, are key

production sites for the

leather industry. Also

included in the list are the

states of Chennai, Tamil

Nadu, West Bengal, Uttar

Pradesh ,Karnataka and

Andhra Pradesh. There are

more than 4000

Manufacturing units

The Structure of the Leather Industry is quite separated. It is spread into segments, which are as follows:

Indian Leather Footwear Industry

India produces and exports :ballerinas, booties, huaraches, tennis shoes, sandals, moccasins, dress and casual shoes

Most manufacturers of modern footwear in India have established brands in Europe and Australia & Africa that they are supplying to.

Facts & Figures Cont

Tanning and Finishing capacity

The tanning and finishing capability for refining millions of

pieces of hides and skins annually is scattered among different

parts of the country

The duty free (tax free) import of hides and skins from all over

the world is a sign of strength and stability

This is attracting for foreign companies looking to relocate.

Facts & Figures Cont..

Indian Leather Goods IndustryGermany is the major market for India’s leather goods at

14.45% followed by USA, UK, France and ItalyCows, Sheep, Goats and Buffaloes majorly account for this

Industry.

Facts & Figures Cont…

Established in 19th Century, with the major buyers being the Military and Police. India is 3rd biggest market of saddler and harness goods.

There are 150 plants in an organized sectorThere are roughly 105 export oriented unitsThe major producer of Saddler is Uttar PradeshThe Major consumers :Germany, U. K, USA, France,

Netherlands, Japan, Australia and New Zealand. (leatehrindia.org, 2010).

Facts & Figures Cont….

Indian Garments IndustryIn the mid 1980’s Indian leather Garment Industry entered the

world of garment exports. Exports of $ 475 million are done as per 2011. (Apparel-

India.com)Germany is the major destination of the leather garments

exported from India

Facts & Figures Cont…..

Hides-65 million piecesSkins- 170 million piecesLeather Footwear- 909 million pairsLeather shoe uppers- 100 million pairsLeather garments- 16 million piecesLeather goods- 63 million piecesIndustrial gloves- 52 million pairsSaddler- 10 million pieces 

 

 

Facts & Figures Cont……

Strengths

Elevated GrowthReadily available, highly skilled, and cheap labor forceSignificant raw material availability(base)The initiatives taken by the Government for the change in the

PoliciesCapability to incorporate new technologies required and to

handle large projectsEmphasis is given to continuous design up gradation & product

development

SWOT Analysis of the Indian Leather Industry

Weaknesses

Lacking support from the government in terms of warehousing The fluctuation in International pricingThe large size of work force are resulting in increased wages Lacking strong presence in the global fashion marketMany unaware of international standards

Opportunities

Potential to accelerate in the domestic marketCultivating fashion awareness globallyUsing decision support software(DSS)Software Asset Management (SAM,SAP) &

information technology would help in eradicate the length of the production cycle required for different products

Threats

Industry is unorganized in major partsThe scope is limited for mobilizing funds through

public issues & private placements (many of the businesses are owned by family)

The difficulty of retrieving bank loans is resulting in costly private borrowing.

Pollution control devices have been installed into more than 95% of the Indian Tanneries.

There is a Special Task force to look into minimization the techniques and control of pollution

Eco Friendly products are being used which can be reused and recycled. They have an “ECO-LABEL” on every box.

Environmental aspects of the Leather Industry

There is Funding support that is provided for market development activities, export promotion, technological modernization & up gradation for production units.

The entire leather sector is now de-licensed for facilitating expansion in terms of modern lines with equipments & state-of-the-art machinery.

There is 100 % Foreign Direct Investment &Joint Ventures permitted

Importing the specified machinery required in leather & footwear industry is allowed at a 5% concessional on import duty.

Duty free import for specified critical inputs required for manufacturing the other leather products & leather garments including footwear under Duty Free Import Scheme (DFIS).

Government Policies to Support the Industry

There are simplified import/export procedures, e.g. quick customs clearances.

There is a program held for giving support to international market of the Leather Footwear products: known as

Market Development Assistance (MDA)FMM &T ( footwear materials, Manufacturing & Technology)

Program & IILF (India International Leather Fair) are great events to gain new opportunities in the industry; also to discover fresh ideas. The industry events provide a good chance for individuals seeking out their newest competitors, the latest trends, & sophisticated leather products and services

Government policies to Support the Leather Footwear Industry Cont.

Tax benefits for the Software Technology Parks of India (STPI) and Export-Oriented Unit (EOU) have been extended till end 2011 which was going to end In March, 2011.

ECGC (Export Credit Guarantee Corporation) provides protection against nonpayment of the exported goods to the importer.

Draw backs are available on a pair bases for the exports, they are as follows: Rs 39 or 9% whichever is lower.

2% annual waver on the interest paid on the packing credit facility at the end of the year.

Government policies to Support the Industry Cont..

Data taken from : Index Mundi & Trading Economics

Data 2005-2006 & 2006-

2007(% change)

Data 2006-2007 & 2007-

2008(% change)

Data 2007-2008 & 2008-

2009(% change)

Data 2008-2009 & 2009-

2010(% change)

Data 2009-2010 & 2010-

2011(% change)

Data 2010-2011 & 2011-

2012(% change)

Data 2011-2012 & 2012-

2013(Expected% change)

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00% USA % Change (Leather Footwear)

USA

Data taken from: LeatherIndia.orgDat

a 20

05-2

006

& 2

006-

2007

(% cha

nge)

Data

2006

-200

7 &

200

7-20

08(%

cha

nge)

Data

2007

-200

8 &

200

8-20

09(%

cha

nge)

Data

2008

-200

9 &

200

9-20

10(%

cha

nge)

Data

2009

-201

0 &

201

0-20

11( %

cha

nge)

Data

2010

-201

1 &

201

1-20

12( %

cha

nge)

Data

2011

-201

2 &

201

2-20

13 E

xpec

ted

% cha

nge)

Data

2012

-201

3 &

201

3-20

14 E

xpec

ted

% cha

nge)

Data

2013

-201

4 &

201

4-20

15( E

xpec

ted

% cha

nge)

Data

2014

-201

5 &

201

5-20

16( E

xpec

ted

% cha

nge)

Data

2015

-201

6 &

201

6-20

17( E

xpec

ted

% cha

nge)

Data

2016

-201

7 &

201

7-20

18( E

xpec

ted

% cha

nge)

Data

2017

-201

8& 2

018-

2019

( Exp

ecte

d %

cha

nge)

Data

2018

-201

9& 2

019-

2020

( Exp

ecte

d %

cha

nge)

Data

2019

-202

0& 2

020-

2021

( Exp

ecte

d %

cha

nge)

-1000.00%

0.00%

1000.00%

2000.00%

3000.00%

4000.00%

5000.00%

6000.00%

7000.00%

8000.00%

9000.00%

Trend in India’s Export of Leather & Leather Products to difference coun-tries during April-January 2005-2019

% change

Merchandise Import & Export USA (%)

Standard of

Living In USA

Factors for Growth in Demand

Data taken from Index Mundi & Trading Economics

References (N.A), 2011. Delhi: Export Scenario. India International Leather Fair. Retrieved from http://www.iilfleatherfair.in/website/export_scenario.html

(N.A), 2010. Leather Industry of India. Article base. Retrieved from http://www.articlesbase.com /international-business-articles/leather-industry-of-india-2744752.html#axzz1Q3xZohL7

Dicosta, A, 2010. The Rise and Growth of the Indian Leather Industry. WorkOnInternet. Retrieved from http://www.workoninternet.com/business/investment-financial-strategy/46539-indian- leather-industry.html

(N.A), 2010. Analysis of Export Performance of the Leather and Leather products. Council of Leather Exports. Retrieved from http://www.leatherindia.org/export-analysis-apr-jav-2011.asp

(N.A), 2011. Finished Leather goods export on rise. Priyodesk. Retrieved from http://www.priyo.com/business/2011/03/19/finished-leather-goods-export-22159.html (N.A), 2011. Social Accountability 8000-SA8000. Mallenbaker. Retrieved from http://www.mallenbaker.net/csr/CSRfiles/SA8000.html

(N.A), 2011. India To Export $ 285 Bn Leather Goods. Cybex Retrieved from http://www.cybex.in/exim- news/India-To-Export-825-Bn-1095.aspx (N.A), 2010. Foreign Trade Policy. Department of Commerce. Retrieved from http://commerce.nic.in/publications/anualreport_